A G E N D A

A Day in the Life: Mezzanine May 18, 2018

Dan Hemiadan, CFA, Partner, GMB Mezzanine Capital Stephen Hann, CFA, Vice President,

1 A G E N D A

1 Introductions 2 Background & Career Path 3 Firm Overview 4 What is Mezzanine Finance? 5 Responsibilities 6 Skill Set 7 Q & A

2 BACKGROUND & CAREER PATH

Dan Hemiadan, CFA Stephen Hann, CFA

Education Education ▪ BS, St. Cloud State University, Finance ▪ BA, Hillsdale College, Economics

▪ CFA Charterholder ▪ CFA Charterholder

Work History Work History ▪ GMB Mezzanine Capital ▪ Spell Capital Partners

▪ Churchill Capital ▪ Black River / Proterra

▪ U.S. Bank Leveraged Finance ▪ U.S. Bank Capital Markets

▪ Wells Fargo Global Banking

3 FIRM OVERVIEW

Dan Hemiadan, CFA Stephen Hann, CFA

GMB Mezzanine Capital Spell Capital Partners

▪ Mezzanine fund manager ▪ and mezzanine fund manager ▪ Based in Minneapolis, MN ▪ Based in Minneapolis MN ▪ 10 employees ▪ 12 employees ▪ SBIC investment program ▪ SBIC investment program ▪ Currently investing Fund III ▪ ~$600.0 million AUM ▪ 90 investments since 2005 ▪ Currently investing Fund II ▪ Active portfolio: 30+ investments ▪ 31 investments since 2013 ▪ Investment size: $5 – 25 million ▪ Active portfolio: 26 investments

▪ Investment size: $4 – 12 million

4 WHAT IS MEZZANINE FINANCE?

% of Multiple of Funding Capitalization Cash Flows Target IRR Source of Repayment Providers Banks, Cash Flow, Liquidation of Senior 30.0% - 40.0% 2.0x – 3.0x 6.0% - 8.0% Commercial Assets Finance Co’s

Cash Flow, Mezzanine Mezzanine 10.0% - 15.0% 3.0x – 4.0x 17.0% - 19.0% Refinancing, Sale of Firms Company

Private Equity 40.0% - 50.0% 6.0x – 8.0x 21.0% - 25.0% Sale of Company Equity Firms

5 WHAT IS MEZZANINE FINANCE?

Private Equity Funds Mezzanine Funds Concentrated portfolio (5-7 investments) Diversified portfolio (10+ investments) High-risk, high-reward Lower volatility Capital gains Current income Longer time horizon Shorter time horizon / “j-curve” – realizations after 5-6 years – realizations as early as 2-3 years

6 RESPONSIBILITIES

▪ Origination ▪ Portfolio Management 1. network 1. Performance vs. projections 2. Investment banks 2. Liquidity 3. Commercial banks 3. Cushion to covenants 4. Other mezzanine providers 4. Valuations 5. Personal networks

6. Other….? ▪ Regulatory Compliance 1. Reporting ▪ Execution 2. Legal filings 1. Due diligence

2. ▪ Fundraising 3. Credit 1. Marketing 4. Investment committee 2. LP meetings 5. Documentation 7 SKILL SET

1. Due diligence

2. Financial modeling

3. Attention to detail

4. Creative & original thinking

5. Calculated risk / reward

6. Writing

7. Marketing & communication

8. Negotiation

9. Legal concepts

10.High ethical standards

8 Questions?

DOFU 2-2018 432062

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